As companies continue to move applications to the cloud, it's apparent that a hybrid environment is becoming the preferred choice, according to Nomura.
This bodes well for Red Hat Inc (NYSE: RHT), considered one of the most strategic companies within the enterprise software space.
Nomura analyst Christopher Eberle initiated coverage on Red Hat with a Buy rating and $152 price target.
Red Hat is one of the best-positioned infrastructure software companies and offers all the tools necessary to build a hybrid cloud, Eberle said in a note.
The analyst projects tailwinds to revenue, EPS and cash flow for several years to come due to Red Hat's core RHEL platform, producing 24 percent of subscription revenue.
Red Hat’s OpenStack platform could be as big or even bigger than Red Hat Enterprise Linux OS, the analyst said.
“RHT’s OpenStack software provides a cloud platform that works across everyone’s cloud. With 70-percent share of the Linux OS market, RHT’s installed base provides for significant cross-selling opportunitites for application development and merging cloud products,” Eberle said.
With a four times greater price point than RHEL, OpenStack could see significant upside from adoption, the analyst said.
The company’s OpenShift container platform is now considered the "go-to platform" for applications, Eberle said. "OpenShift, at 12-15x the price point of core RHEL, provides the foundation for digital transformation," he said.
Red Hat has the potential for a $66-billion total addressable market by 2020, according to Nomura.
Shares of Red Hat closed at $128.89 Wednesday, up 0.58 percent.
Nomura On Oracle: 'Hop On This Train'
Apple Falls On Report Of iPhone X Weakness: 'High-End Smartphones Clearly Hitting A Plateau This Year'
Latest Ratings for RHT
|Jan 2018||Nomura||Initiates Coverage On||Buy|
|Oct 2017||Bank of America||Downgrades||Neutral||Underperform|
View More Analyst Ratings for RHT
View the Latest Analyst Ratings
See more from Benzinga
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.